RadioShack Closing 1,100 Stores – Repositioning Strategy

RadioShack continues to reinvent itself, but it will do it with fewer stores in the United States.

Courtesy: flickr user untexan

RadioShack continues to reinvent itself but it will do it with fewer stores in the United States. Citing lower store traffic, competition and soft sales in the mobility market, the struggling electronics retailer has decided to close 1,100 underperforming stores.

A list of planned closures was not provided. The Fort Worth, Texas-based company would have to negotiate with landlords and lenders before releasing the locations.

“What we do know is that RadioShack says that they are going to be making those determinations based on individual store performance, sale metrics, demographics, and of course, remaining lease terms,” said Garrick Brown, director of research at Cassidy Turley’s San Francisco office.

Brown noted it wasn’t entirely unexpected news, although it was 600 more stores than RadioShack had initially projected. The company will still have more than 4,000 stores, including 900 dealer franchises in the U.S.

“This comes out to about 20 percent of their locations and this number may still climb in the weeks and months ahead,” he said in his weekly Terranomics retail newsletter.

The news came as the consumer electronics company released its fourth-quarter 2013 financial results that showed fourth-quarter revenues declining 20 percent to $935.4 million and same-store sales dropping 19 percent. The full-year net sales and operating revenues were down to $3.43 billion from $3.83 billion in 2012 and full-year store sales were down 8.8 percent.

“Over the past few months, we have undertaken a comprehensive review of our portfolio from many angles – location, area demographics, lease life and financial performance – in order to consolidate our store base into fewer locations while maintaining a strong presence in each market,” CEO Joseph Magnacca said in a news release about the earnings report and closures. “The result of that review is our plan to close up to 1,100 underperforming stores.”

Michael Hirschfeld, SVP of National Retail Tenant Services at JLL, said the closings were not a surprise.

Michael Hirschfeld, JLL

“Many of the stores they are closing are in malls or shopping centers and on month-to-month leases or were already on the radar for their leases expiring or in a market where they no longer need to be,” he told Commercial Property Executive.

Hirschfeld said he doesn’t’ think RadioShack will disappear any time soon but also doubts the company needs the large number of stores it had in the past because the electronics retailing business has evolved.

“Yes, I think they are going to be around. They serve an important niche market,” he said. “They’re a tremendous presence in so many markets that makes them a go-to source.”

Magnacca, who was brought in to turn around the company, said despite the poor financial results and the planned closures, the firm was making progress on its five-point plan for “repositioning the brand, revamping the product assortment, reinvigorating the stores, operational efficiency and financial flexibility.”

He said the brand equity remains strong and sales were improving in the new Concept Stores, which are designed to “redefine the RadioShack store experience.”

Magnacca added that the company had received positive response to its new brand positioning theme “Do It Together,” which was kicked off on Super Bowl Sunday with one of the day’s most memorable ads. The ad poked fun at RadioShack’s old-school image with ‘80s characters like Alf and wrestler Hulk Hogan barreling through a store as a salesman picks up a phone and says, “The ‘80s called. They want their store back.” The ad ends with the line, “It’s time for a new RadioShack. Come see what’s possible when we do it together.”

Hirschfeld said the ‘80s spot was “the coolest RadioShack ad we’ve seen in a decade.”

“Very quickly and with one fell swoop they said ‘hey, we’re hearing how you perceive us and we’re changing the way you interact with us the most in a store experience’,” Hirschfeld said. “So much of retailing has become experiential. The store experience needs to be one you remember.”

Hirschfeld said RadioShack’s decision to close so many stores was “very opportunistic.”

“They can use this new format as a way to reposition themselves in many markets,” he told CPE. “The nature of the business they are in has changed and they are changing with it.”